The Building Safety Bill – what insurers and brokers need to know

The impending Building Safety Bill aims to introduce more stringent regulatory measures for high-risk buildings following the Grenfell Tower fire, in light of this, there are many incoming changes that insurers and brokers need to be aware of. 

Speaking during law firm Weightman’s recent Building Safety Bill webinar hosted by , associate solicitor James Walsh said: “[The Building Safety Bill] offers welcome guidance to the industry at a high level. In theory, a safer industry will eventually reduce the amount of claims made by professionals and that, in turn, should lead to fewer losses.”

Walsh explained that insurers should consider several factors arising from the new bill, which is set to be passed in 2023, these include:

• The insurability of risks placed on the duty holders, such as the accountable person.
• Design, construction and refurbishment of the building.
• Whether professional indemnity insurance will cover the persons carrying out the aforementioned work.

Accountable person

The role of the “accountable person” is a new creation for the bill.

This person will be responsible for assessing building safety risks on an ongoing basis, taking all “reasonable steps” to manage this while also submitting information via a mandatory report to the new Building Safety Regulator.

Lauren Whiting, a solicitor at Weightmans, said: “It is unclear whether the insurance industry would be willing to extend professional indemnity cover to encompass the obligations placed upon that person.

”They should be entitled to cover like any other professional, but it is likely that the uncertainty of this role and the risk it may bring is likely to lead to higher premiums and additional endorsements, at least in the short-term.”

Meanwhile, the bill will also allow the recently appointed Building Safety Regulator powers to assign specific roles and duties to various stakeholders, for example the creation of a new building safety manager role - this individual will be responsible for providing the accountable person with assistance.

Whiting continued: “The new regulator will also have the power to withdraw products or materials from the UK market which it deems fall short of the requisite standard, thereby regulating the market further. In practice, this means the burden of insuring product safety will fall upon the manufacturer.”

Notification changes

Natalie Keyes, construction principal associate at Weightmans, added: “Some of the responsibilities introduced by the bill and the surrounding legislation will likely be covered by existing obligations on construction professionals.

“But consideration does need to be given as to whether current policy wording will be adequate enough to address additional obligations and roles.”

Therefore, insurers should consider risks, extensions, underwriting, policy wordings and, in some cases, exclusions when looking at coverages for newly created roles under the bill, whereas brokers will be instrumental in giving advice on the new changes. 

Whiting added that there may also be new notification needs included within the reporting requirements to the Building Safety Regulator, for the aggregated information delivered and subsequently published.

A notification in insurance requires the insured to notify the insurer of any occurrence that could spark a claim.

“Inevitably, this new reporting regime will have an impact on notifications, which will bring with it the need for [an] amendment of existing policy terms to reflect new requirements,” Whiting said.

She stressed that brokers should consider the impact of newly created roles, reporting obligations, policy terms and exclusions when dealing with clients operating in this sector.

Speaking about professional indemnity insurance, Whiting continued: “We all know it’s a difficult market - additional questions will need to be asked and advice given.

”Brokers should be aware that insureds wishing to obtain insurance for newly created roles may face new and more stringent checks at proposal and renewal stages.”

Meanwhile, Walsh added that insurers should be aware of any fines and sanctions for breaches of building regulations.

“It creates some uncertainty over whether insurance will have the appetite to cover what are quasi-criminal penalties, as well as potentially unlimited fines,” he said, this could make it “highly unpalatable” for insurers.